The de-dollarization initiative is taking over the world, where a handful of developing countries want to stop using the US dollar for trade. The phenomenon gained momentum after the US imposed sanctions on Russia in February 2022 over its invasion of Ukraine. Since then, Russia has collaborated with China and pushed the de-dollarization agenda to developing countries in Asia, Africa and South America.
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While the idea sounds extraordinary on paper, the reality is very different and difficult to control. Just accept it, the US dollar is the world's de facto currency for all trade and transactions. Local currencies are more volatile and less valuable than the US dollar at any given time. That's why the de-dollarization initiative sounds good on paper, while in reality it makes no sense to tackle the US dollar.
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Developing countries must first strengthen their local currencies before they can even consider challenging the US dollar. It has taken the USD a century of work to get to where it is today, and overnight replacement is just wishful thinking. Therefore, de-dollarization and local currency appreciation against the US dollar have only a small chance of success.
US Dollar: Dedollarization is a Joke, Analyst Explains
Jeffrey Christian, the founder of CPM Group, emphasized that there is demand for the US dollar even after threats to local currencies. He called the idea of de-dollarization a “bad joke” and explained that no country is dumping the US dollar. “It's a myth, and it's nonsensical, and it's very persistent. It's terrifyingly persistent. Nobody is dumping US dollars.” Christian said about de-dollarization Business insider.
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Christian pointed out that as of April 2022, the US dollar represented 88% of all daily foreign exchange transactions, according to the Bank of International Settlements. Finally, Christian emphasized that de-dollarization is a myth and a pipe dream that developing countries carry around.